China: China toughens up on abuses of administrative powers

On 1 November 2014, the People's Congress of China approved proposed amendments to China's Administrative Procedure Law ("APL") respect of private actions against government agencies for abuses of administrative powers.

Although the AML includes an entire chapter addressing abuses of administrative powers, the provisions are considered to be somewhat lacking in bite. The antitrust enforcement authorities are only authorized to provide advice to the body responsible for a government agency which is alleged to have abused its administrative powers. The antitrust authorities are unable to take any action against, or impose any penalties on, the agency themselves. In addition, to date there have been very few private enforcement actions against government agencies as the existing legislation makes it difficult for individuals and entities to bring such actions.

The reforms, which are explained in this article, are intended to rectify the status quo and will take effect from 1 May 2015.

I. Introduction

As a country with a powerful government, China has an interventionist approach to the operation of the economy and the market, which often attracts controversial debate. Therefore, when China's Anti-Monopoly Law ("AML") came into effect six years ago, it was widely expected to be the sword of Damocles hanging over the Chinese government agencies' heads to ensure that they do not abuse their administrative powers.

Although the AML includes an entire chapter addressing abuses of administrative powers, the provisions are considered to be somewhat lacking in bite. The antitrust enforcement authorities are only authorized to provide advice to the body responsible for a government agency which is alleged to have abused its administrative powers¹. The antitrust authorities are unable to take any action against, or impose any penalties on, the agency themselves. In addition, there have been very few private enforcement actions against government agencies to date as the legislation, as drafted, makes it difficult for individuals and entities to bring such actions. Recently, an action for abuse of administrative powers initiated by Shenzhen Sware Technology against Guangdong's Department of Education has attracted public attention as it will be the first administrative abuse case to go to trial since the AML came into force².

On 1 November 2014, the People's Congress of China approved proposed amendments to China's Administrative Procedure Law ("APL"), which are intended to rectify the status quo and which have been welcomed by the public. The new version of APL will take effect from 1 May 2015.

II. Reforms to Facilitate Administrative Litigation

The reforms introduce several new provisions, as well as revising existing provisions, which may remove current obstacles to bringing administrative proceedings against government agencies for abuses of their administrative powers. The main reforms can be divided into those which introduce substantive changes and those which introduce procedural changes.

2.1. Substantive Reforms

2.1.1 Express Cause of Action for Abuse of Administrative Powers

A new Article 12(8) of the APL will expressly allow undertakings to bring proceedings against government agencies for abuses of their administrative powers that eliminate or restrict competition³. Private parties have found it difficult to identify an express cause of action in the current version of the APL in order to bring proceedings against government agencies which have abused their administrative powers. Article 11 of the pre-existing version of the APL provides that private parties are able to bring proceedings against government agencies in certain circumstances or as provided for by other laws. However, it does not include abuses of administrative powers in the list of circumstances.

As a matter of practice, Chinese courts require a clear cause of action in order to accept a case. Nevertheless, an abuse of administrative powers was not expressly provided as a cause of action in either the APL or the AML. The new Article 12(8) will provide plaintiffs will an express cause of action.

2.1.2. Express Right to Challenge Normative Documents

A new Article 53 of the APL will enable private parties to challenge not only specific decisions of a government agencies, but also the rules and regulations on which they are based⁴. The new provision stipulates that if a citizen, a legal person or any other organization considers a normative document issued by State Council departments, local governments or their departments, on which a specific decision is based, is not in accordance with law, they may request to have the normative document reviewed in the proceedings to challenge the relevant decision.

Under the framework of the pre-existing version of the APL, only specific decisions rendered by the government can be challenged before the court, but there is no recourse in respect of the administrative rules and orders on which they are based, however arbitrary they may be. However, abuses of administrative powers may include the enactment of arbitrary or illegal administrative rules and orders. Therefore, the new Article 53 might considerably improve the status quo. However, it is noteworthy that laws enacted by National People's Congress and regulations enacted by the State Council are excluded from the documents that can be reviewed.

2.2. Procedural Reforms

2.2.1. Extended Statute of Limitations

The pre-existing version of the APL only provides for a three month limitation period to bring proceedings in respect of administrative acts, whereas Article 46 of the new version of the APL will extend the limitation period for actions in respect of an abuse of administrative power to six months.

In practice, the three month limitation period has prevented numerous cases from going to trial. For instance, in 2008, on the day when the AML became effective, four anti-counterfeit technology companies filed an antitrust lawsuit with the Beijing No. 1 Intermediate People's Court against the State General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), alleging that the AQSIQ had abused its administrative powers by promoting and favouring one state-controlled inspection company. However, the Beijing court decided not to accept the filing on the basis that the limitation period had expired. Furthermore, in October 2014, three concrete producers refused to accept the fines imposed by the Jiangsu Province Price Control Administration for an alleged cartel agreement and they appealed the decision before the court. However, the Nanjing Intermediate Court dismissed the case on the basis that the limitation period had expired.

The extension of the limitation period to six months will give plaintiffs more time to prepare a claim and bring proceedings, which is of vital importance for private parties which are not necessarily familiar with the APL and might not be fully aware of their legal rights.

2.2.2. Express Designated Jurisdiction for Administrative Litigation

A new Article 18 of the APL endows the higher people's courts with the power to designate particular courts across the administrative regions to hear particular cases upon the authorization of the Supreme Court, in the light of the circumstances of the case. To date, some courts have rejected claims against their local government because they depend financially on their local government and may therefore be discouraged from taking action against it. The power to designate cases to different administrative regions can, to some extent, reduce the ability of local governments to intervene and discourage the courts from taking action against them.

2.2.3. Stricter Requirements Urging the Courts to Accept Cases which Quality

According to Article 42 of the pre-existing version of APL, a court should decide in writing whether to accept or dismiss a case within seven days upon its receipt of the filing materials, and the plaintiff may choose to file an appeal to a higher level court if it is not satisfied with the decision. However, in practice, some courts refuse to make a written decision about whether or not to accept a filing, which may deprive the plaintiff of its right to appeal and to thereby initiate proceedings.

To address this issue, Article 51 of the new APL will require courts to accept the filing materials if they cannot decide whether a filing is adequate, and to issue a written document recording the date of receipt of the filing materials. Furthermore, if a court decides to dismiss a filing, it will be required to clearly state the reason for dismissing it in its decision. The responsible judge or court clerk will be liable to a punishment if they dismiss a case without reasonable cause.

2.2.4. Other reforms

There are a number of other amendments which will facilitate enforcement in respect of abuses of administrative powers. For example, Article 96 of the new APL stipulates that if an administrative organ refuses to execute a judgment or order, the head of the administrative organ and the person directly in charge may be detained in serious cases. This amendment may help to ensure the implementation of administrative judgments.

Article 3 of the new APL stipulates that the persons in charge of a government agency alleged to have abused its administrative powers shall attend the hearing in person. If they cannot attend, other relevant employees should be appointed to attend in their place. This provision may have a deterrent effect on the officials and urge them to be careful in making decisions which could harm the legitimate rights of private parties.

III. Conclusion

Clamping down on abuses of administrative powers is a vital part of implementing the rule of law and an important task for China in the forthcoming years. On 1 December 2014, Mr. Xu Kunlin, the Director General of the NDRC Price Supervision and Inspection and the Anti-monopoly Bureau stated that the NDRC's priority for anti-monopoly enforcement in 2015 will be to target abuses of administrative powers. The reforms mentioned above will facilitate the enforcement of the AML in the context of abuses of administrative powers. However, it remains to be seen whether the reforms will be enough to encourage the victims of abuses of administrative powers to bring private actions against government agencies, given the sensitivities involved in challenging the actions of government agencies in China.

Footnotes

¹ Article 51 of the AML stipulates that where an administrative organ or organization empowered by law or administrative regulation to administer public affairs abuses its administrative power to eliminate or restrict competition, the superior authority thereof shall order the agency to make rectification and impose punishments on the directly responsible persons in charge and the other directly liable persons. The antitrust enforcement agencies may offer suggestions to the relevant superior authority regarding how to handle the abuse in accordance with the law.

²Joy C. Shaw, PaRR, http://app.parr-global.com/intelligence/view/1177369.

³Article 12(viii) of the new APL stipulates that the people's courts shall accept proceedings brought by citizens, legal persons or other organizations where an administrative organ is considered to have abused its administrative powers with the effect of eliminating or restricting competition.

⁴ Including rules, provisions, measures, determinations and announcements, etc which are enacted by State Council Departments, local governments etc (excluding regulations enacted excluding regulations enacted by State Council Departments, provincial departments and major city governments designated by State Council.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.